Pay in the manufacturing sector has levelled out in the three months to the end of June, according to pay data by manufacturers’ organisation EEF and JAM Recruitment.

The July 2011 Pay Bulletin found that the average pay settlement for the period was 2.5%, the same as the revised figure for the three months to the end of May.

Analysis found that while the proportion of settlements agreed at more than 3% continued to drift upwards to almost one in five settlements, almost a quarter are below 2%.

Pay freezes are still agreed in 12% of settlements.

Settlements between 2% and 3% remained the most common, reflecting economic realism among employers and employees.

Lee Hopley, EEF chief economist, said: “After a period of gradual increases, settlements appear to have levelled out below the long-term normal range.

“Whilst there is undoubted pressure to give higher settlements, there is an equal dose of realism among [organisations] and their employees in response to economic uncertainty and competitive pressures.

“As far as manufacturing is concerned at least, the Bank of England has little to fear from wage inflationary pressures.”

John Morris, chief executive of JAM Recruitment, added: “Although pay settlements may appear to be levelling out, we are seeing a more candidate-led market where employees know there is growing demand for their valuable skills and that many employers will be willing – or compelled – to pay a premium for the best of the best

“Another trend we are noticing is that because candidates know they can often command higher wages as a contractor rather than a permanent member of staff they are often more willing to take on temporary work.

“In an economy that is still by no means fully recovered, and with margins still tight, the future challenge for employers is how to factor in the cost of employing the talent they need, and keeping it.”